Conrad Black: The German hour has come at last

The German hour has come at last

It is all coming down, in the Western economy, as it should, to Germany and the United States.

As the American Revolution began in 1775, Prussia, the core of modern Germany, had just entered the ranks of the Great Powers under Frederick the Great. At the time, the American colonies were dismissed in London and Europe as knots of raw-boned colonists clinging to the Atlantic shore and fending off savages, though they in fact had 30% of the population of Great Britain, and a higher standard of living than any country in Europe.

Related

In the same war (the Seven Years’ War to the British; the French and Indian Wars to the Americans; and, variously, the Third Silesian War, Third Carnatic War, and Pomeranian War to other combatants – this being the world’s first real world war), Frederick the Great had been at war with all his neighbours: France, Austria, Sweden and Russia. It was the time of the great Central European monarchs: Maria Theresa in Vienna, and Catherine the Great (who thought America a colony of deported criminals) in St. Petersburg, as well as Frederick himself. As America prepared to evict the British from what they considered their country (through Benjamin Franklin’s brilliant recruitment of the French to assist in this), the Americans were seen as the outer and ragged frontier of civilization; and Prussia, directed by its great king from the sumptuous palaces of Sans Souci at Potsdam, returned to the forefront of European affairs for the first time since the days of Charlemagne. By fighting on all its frontiers at once, it gave the world notice of the German vocation for war that would become notorious in the centuries that followed.

In fact, the geopolitical strength of Prussia and America were not so starkly different. The United States, as they were about to become, had about 3.2 million people, including about 400,000 slaves. Prussia had about 4.5 million people (including some hundreds of thousands of unenthusiastic Poles and Saxons and Austrians). The relationship between them was thus like that today between France and Germany, and far from the absurd multiple that the mythologies of American rusticity and Prussian impregnability would imply.

Two and a half centuries later, Germany is situated as the most prominent of euroequals, and it has tolerated many historically soft-currency countries to sign false prospectuses for generous entry into the Eurozone. Girt-about with prosperous former enemies, all enjoying an American military guaranty, and with the Russian threat having receded to the obscurity and primitivism of the Grand Duchy of Muscovy, Germany has liberalized its labour markets, reduced taxes and spurred economic growth. Meanwhile, its neighbours — who have happily picked Germany’s pockets with exaggerated claims of their currencies’ values — continued to imagine that 40% or fewer of their people could work while the rest received some sort of government benefit. In the confident morning of Europhoria, which lasted for over a decade, financial markets assumed that bonds denominated in Euros should enjoy almost a uniform yield, because of the presence of Germany at the centre of the European project, oblivious to the fact that yield is determined pre-eminently by the quality of the issuer.

As one European country after another became tangled in the denial of its vulnerability, the declining euro worked to the advantage of Germany’s high-tech exporters. German opinion, meanwhile, was resolute against further generosity to Mediterranean beach bums expecting Germans to do the work for the whole continent. Instead of imposing austerity by raising consumption and transaction taxes while stimulating the economy with reductions in personal and corporate income taxes, the European Central Bank and leading European finance ministers required heavy spending cuts and tax increases, which poured gasoline on the fire of raging deficits. Now the suckling pigs are being roasted in the order of the intensity of their addiction to the warm German fiscal milk.

Germany did offer assistance to countries that took the plunge and reformed their labour markets and tax structures, as Germany itself had done. Last week, under the din of the squealing, roasting pigs, Germany offered relief if authority over work rules, taxes, benefits and other relevant variables were handed over to the European Union, i.e. Germany. Thus, the local politicians who are being evicted from their posts at every rendezvous with the electorate would devolve the hangman’s duty to execute the welfare excess upwards to the nameless dough-faces of the European Commission.

Great, benign Germany has a perfect bedside manner and seeks only the administration of the medicine it has already self-prescribed and taken. The inexorable logic of Teutonic arithmetic, not the hob-nailed jackboot of the crisply uniformed German soldier, reverberates on the cobblestones of Europe.

If Europe can’t swallow the medicine unaided, the European Union will continue as a free trade zone, gently dominated, as it was by the Americans in the Cold War, by a German bloc that would retain the euro and include Austria, the Netherlands, most of Scandinavia, and perhaps the Czechs and Poles. If the laggard countries of the Eurozone can embrace the impersonality of Euro-enforcement of the public burning of the social-safety hammock, and the enticement of Europeans into the workforce in sufficient numbers to make its society affordable, Germany will subtly guide a continent that preserves a much more unitary economic model. The statesmen of the past who fought German leadership in Europe, out of well-founded fear of German domination, have been replaced by those who seek it now, from equally well-founded confidence in German good sense; and this despite Germany’s campy and absurd flirtation with pacifist inertia and the nihilistic humbug of the “Pirates’ Party,” which is currently supported by 12% of Germans and has no program. Not all may hear it simultaneously, but Germany’s hour, Der Tag, has come at last.

In the United States, things are simpler. From the earliest days, all Americans believed their country was predestined to world leadership, and it was. But the record of the present administration is completely indefensible: a 50% increase in debt, most of it subscribed by notes issued in a shell game from the Federal Reserve to its parent, the Treasury; an 80% increase over the average Clinton-Bush unemployment rate (from 5.4% to 9.4%); the highest percentages of GDP represented by federal spending (25%), federal deficit (10%), and national debt (debatable because of funny accounting, but generally thought to be between 70% and 90%) since the Second World War, and the highest percentage of Americans receiving state benefits in history (47%).

In such a naturally powerful, talented and motivated country, all that is required for economic recovery is the rigorous application of Grade-three arithmetic. And it will happen, starting either next January, or, from much farther down the well, four years later. Dealing with the pandemic corruption of American society, as with the collapsed European birthrate, will be more complicated, but it is less urgent. For the moment, the pressing concern is the health of the Western economy. And its fate will be decided primarily in Berlin and Washington.

In the wake of a Grammy Awards ceremony that disappointed many, from Kanye West to the masses on Twitter lamenting the state of pop music, a historical perspective is key. Few are better poised to offer one than Andy Kim.